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12th November 2021 Trade and Financial Services Round Up

KENYA

Kenya’s economy rebounds 10.1%, first double-digit growth in 4 decades (Source: Business Daily)

Kenya’s economy expanded 10.1 percent in the second quarter of the year on the back of a rebound in economic activity compared with a similar period last year when tough Covid-19 containment measures led to a 4.7 percent contraction. Data from the Kenya National Bureau of Statistics (KNBS) showed the growth in the April-June period was faster than the first quarter when Gross Domestic Product (GDP) slowed to 0.7 percent compared with 4.4 percent in the corresponding period in 2020. The growth recorded was mainly as a result of easing Covid-19 containment measures that facilitated gradual resumption of economic activities,” said Treasury Secretary Ukur Yatani. The data showed that recovery in the second quarter was largely supported by the resumption of learning activities which surged 67.6 percent year-on-year followed by the ICT sector at 25.2 percent. Other sectors with significant jumps in inactivity were services (20.2 percent) and manufacturing (9.6 percent).

Kenyan imports from Uganda down 34% as trade wars bite (Source: The East African) 

The value of imports from Uganda dropped 34 percent in eight months to August as trade wars between Kenya and its neighbour took a toll on the flow of goods. Trade data from the Central Bank of Kenya indicates that the imports from Uganda dropped from a record high of Ksh3.2 billion ($29 million) in February to Ksh2.09 billion ($19 million) in the review period, hitting a seven-month low. The two countries have had trade disputes now running into the second year after Nairobi banned products like milk and poultry from Uganda.

Kenya mulls one-stop border posts to spur trade with Ethiopia, Somalia (Source: Xinhua Net) 

Kenya Revenue Authority (KRA) plans to establish One-Stop Border Posts (OSBPs) at the common land borders to spur regional trade with Ethiopia and Somalia once construction of a key road project is completed. KRA commissioner for Customers and Border Control Lillian Nyawanda said the body will play a key logistical role in the construction of a major road connecting the Horn of African nations. The road, under the banner Horn of Africa Gateway Development Project (HoAGDP) which connects Kenya to Somalia and to Ethiopia has been launched in Isiolo town in east Kenya. “The establishment of the OSBPs is expected to spur growth in import and export trade and thus facilitate legitimate trade and collect the correct revenue,” said Nyawanda. The Horn of Africa region comprising Djibouti, Eritrea, Ethiopia, Kenya and Somalia is growing rapidly with the population expected to reach 250 million by 2030.

UGANDA

Unfair taxes failing Islamic financial services (Source: Monitor)

Unfair and prohibitive taxes are preventing Islamic Banking from taking off six years after the law establishing it was enacted, according to details contained in the Proposed Regulatory Reforms in the Banking Sector. The Muslim community led by Uganda Muslim Supreme Council and the Kibuli-based factions have previously said there was no excuse as to why Bank of Uganda would fail to implement Islamic Banking, noting that Uganda has enough Muslim scholars with the requisite skills to help in the implementation of Islamic Banking. Whereas Bank of Uganda has previously blamed the lack of Sharia scholars for its failure, commercial banks, under UBA say there is need to introduce specific tax reforms to remove prohibitive taxes associated with Islamic finance products, which if compared to those of conventional finance and investment products, are unfair.

Uganda Bankers Association (UBA) states that court case has exposed gaps in laws governing syndicate lending (Source: Monitor)

Early last year Ham Enterprises lodged an application in the Commercial Division of the High Court in which it was claimed that DTB Uganda had provided DTB Kenya an illegal cover to conduct business in Uganda. The case had resulted from a notice in which DTB had indicated it would proceed to sell a number of mortgaged properties over Ham’s failure to repay a $8.3m credit facility. In his judgement Justice Henry Peter Adonyo concurred with the applicant ruling that DTB Uganda had indeed provided DTB Kenya an illegal cover to conduct money laundering by providing financial services in a jurisdiction it was not registered. The ruling, which has since been appealed, was widely debated with UBA describing it then as a “reckless judgment” that had put Shs5.7 trillion worth of syndicated loans at stake. The [Financial Institutions Act] needs to be amended to clarify what a non-Ugandan lender should be subjected to,” UBA recommends, noting it is not clear whether syndicated lending is regulated under Ugandan laws. UBA further recommends that the Financial Institutions Act should be amended to eliminate provisions that require foreign lenders to have a Bank of Uganda license before they can lend in Uganda as well as clarify what constitutes agent banking.

TANZANIA

Zanzibar seeks stakeholders’ views on cryptocurrencies (Source: The Citizen) 

The Revolutionary Government of Zanzibar is seeking stakeholders’ views on digital currencies, whose uptake is gaining momentum around the world. Zanzibar’s Minister of State (Economy and Investment), Mr Mudrick Soraga, said “We are seeking views on the matter before deciding whether it is viable or not”. Prof Haji Semboja of the State University of Zanzibar’s Economics Department said given that Zanzibar is a service-based economy, it was the right move for them to start engaging stakeholders on digital currency.Since entering mainstream use globally, travellers and tourists have been using cryptocurrencies such as bitcoin as a form of payment for flights, hotel reservations, transportation, and more.

Tanzania state-owned utility, Tanesco has signed  $30 million deal with an Indian multinational technology company, Tech Mahindra (Source: The Citizen)

Tanesco, The Tanzania Electric Supply Company Limited, has signed a deal with Tech Mahindra for the provision of a Cooperate Management System (CMS), which seeks to automate systems of the state-run Tanesco whose management team was recently overhauled. Tanesco is engaged in the entire value chain of generation, transmission and distribution of electricity across Tanzania and is currently transforming itself into a digital enterprise, deploying the full spectrum of technology. The deal valued at $30 Million (Tanzanian Shillings 69.1 Billion) is expected to reduce daily operation costs, increasing capacity to serve both customers and staff, and improve the efficiency and accountability of Tanesco’s billing and reporting capacity. 

Vodacom Tanzania ordered to pay the Tanzania Revenue Authority Sh3 billion ($1.3 Million) (Source: The Citizen) 

The Court of Appeal said Vodacom Tanzania must pay the Tanzania Revenue Authority (TRA) Sh3 billion withholding tax on purchase of a computer software from Siemens Telecommunications (Pty) Limited. The highest court in the land has upheld decisions of the Tax Revenue Appeals Board (TrAB) and the Tax Revenue Appeals Tribunal (TrAT) that had turned down Vodacom’s attempts to escape the tax liability. The two tax appeal bodies had held that payment that Vodacom made to Siemens for the purchase of the software was taxable under the Income Tax Act. The dispute began in 2006 when the taxman conducted a tax audit on the telecom’s operation and splashed the firm with Sh1 billion and Sh1.9 billion respectively as withholding tax and penalties on the services and royalty for the years of income 2001 to 2004.

RWANDA

Central Bank of Rwanda has called on banks to reach out to their customers about worrying loans (Source: Rwanda Broadcasting Agency)

New figures from the Central Bank of Rwanda show that the strategy the bank has continued to implement in financial management has helped reduce the cost of loans between banks and the interest that private banks lend to financial institutions. The Governor of the Central Bank of Rwanda, John Rwangombwa, says this has helped banks increase their lending to the private sector. Although many sectors of the country’s economy have been affected by the COVID-19 epidemic, the Governor of the Central Bank of Rwanda says measures have been taken to prevent the financial consequences of the epidemic. It’s just that there is nothing wrong with that, as Governor Rwangombwa urges bankers to reach out to their customers with worrying loans and work together to find solutions as soon as possible.

Bank of Kigali profit up 33% on income rise (Source: Rwanda Today)

Bank of Kigali (BK) weathered Covid-19 shocks to register a 33 percent growth in net profit for the nine months to September 30, 2021 helped by growth in both interest and non-interest income. The group’s net profit increased to Rwf36.73 billion ($35.66 million) from Rwf27.62 billion ($26.81 million) in the same period last year. Diane Karusisi, the group’s chief executive stated “The economy is projected to rebound in the current year with a positive outlook through to 2022, supported by high infrastructure project spending and a pickup in the manufacturing and service sectors as the effects of the Covid-19 pandemic dissipate”. Net interest income grew by 20.52 percent to Rwf99.56 billion ($96.67 million) from Rwf82.61 billion ($80.21 million) in the period while non-funded income increased by 41.73 percent to Rwf31.59 billion ($30.67 million) from Rwf22.28 billion ($21.63 million).

ETHIOPIA

Ethiopia’s Bahir Dar Industrial Park Begins Exporting Textiles (Source: 2Merkato)

Bahir Dar Industrial Park, located in Ethiopia’s Amhara region, has started exporting textiles. The industrial park, which went operational in October 2020, has so far created permanent and temporary employment for 1,300 workers. Hop Lun Apparel Ethiopia PLC, a company founded in Hong Kong in 1992, has become the first company to export apparel from its production plant at Bahir Dar Industrial Park. The company has exported 75,000 apparel, worth over $570,000, to the US market. Tiruye Kume, General Manager of Bahir Dar Industrial Park, remarked the industrial park will have an important role to play in alleviating the lack of foreign currency as it goes on to operate in its full capacity. Employment, skill transfer, and generating foreign exchange are priority areas the industrial park is focused on, she added.

Italian, Indian Companies Express Interest to Invest in Pharmaceuticals in Ethiopia (Source: 2Merkato)

Bracco S.P.A. Healthcare International Group, an Italy-based company, and Zuvius Lifesciences Pvt. Ltd, an Indian pharmaceutical giant have expressed their interest to invest in Ethiopia. The Commissioner and Deputy Commissioner of the Ethiopian Investment Commission (EIC) have held discussions with the management of both companies, during which EIC has briefed the respective company’s management regarding the opportunities in the pharmaceutical and health sector in Ethiopia. EIC’s top management has reiterated the unwavering support of the commission to the companies seeking to invest in Ethiopia.

ERITREA

COVID announcement from the Ministry of Health (Source: Ministry of Information Eritrea)

Ten patients have been diagnosed positive for COVID-19 in tests carried out at Quarantine Centers and Testing Stations in the Central, Southern, and Anseba Regions. Out of these, seven patients are from Testing Stations in Paraduba (2), Embaderho (1), Beleza (1), Kuandeba (1), Asmara (1), and Zigib (1); Central Region. Two patients are from Testing Station (1) and Quarantine Center (1) in Dubarwa, Southern Region. The last patient is from the Testing Station in Elaberet, Anseba Region. On the other hand, thirty-one patients who have been receiving medical treatment in hospitals in the Southern (30) and Northern Red Sea (1) Regions have recovered fully and have been discharged from these facilities. The total number of recovered patients has accordingly increased to 6,826 while the number of deaths stands at 48. The total number of confirmed cases in the country to date has increased to 7,013.

SOMALIA

Somalia will soon announce deadline for maiden off-shore crude licenses (Source: S&P Global Platts) 

Somalia will announce the deadline to bid for its first crude oil offshore licensing round “soon” after receiving interest from international companies to start exploration drilling in the country, as per the Director General of the country’s Ministry of Petroleum & Mineral Resources. The Somalia Petroleum Authority launched the country’s first-ever offshore round in May 2020 offering seven blocks in the offshore which runs into the Indian Ocean and Gulf of Aden. The seven blocks in the licensing round are estimated to hold more than 30 billion barrels of oil as per the Director General Abdi. Somalia has more than 200 blocks offshore that could potentially hold crude oil, and Somalia is also looking into ways to attract investors in downstream operations including refineries as the country currently imports all of its gasoline from the Middle East, mostly from the UAE and Oman, Abdi said.

SUDAN

Sweden charges Lundin Energy executives with complicity in Sudan war crimes (Source: Reuters)

Swedish prosecutors on Thursday brought charges against the chairman and former CEO of Lundin Energy (LUNE.ST) for complicity in war crimes carried out by the Sudanese army and allied militia in southern Sudan from 1999 to 2003. Prosecutors said the company had asked the Sudanese government to secure a potential oilfield, knowing this would mean seizing the area by force. This made the executives complicit in war crimes that were then carried out by the Sudanese army and allied militia against civilians. Sweden-based Lundin Energy said in a statement that it rejected any grounds for allegations of wrongdoing. It identified the indicted executives as Chairman Ian Lundin and former CEO Alex Schneiter, now a board member. The company, known as Lundin Oil until 2001, sold its Sudan business in 2003. The prosecutors also filed a claim to confiscate 1.39 billion crowns ($161.7 million) from Lundin Energy, corresponding to the profit the company made from the sale of the Sudan business in 2003. The company said it would contest this claim.

Mashreq Bank Hit With $100 Million N.Y. Fine Over Sudan Violations (Source: Bloomberg)

Mashreqbank PSC, Dubai’s third-biggest bank, will pay $100 million to settle allegations that it violated U.S. sanctions by illegally processing more than $4 billion of payments tied to Sudan, a New York financial regulator said on Tuesday. The U.S. imposed sanctions on Sudan in 1997 for supporting international terrorism and human rights abuses. The oldest privately owned lender in the United Arab Emirates processed the transactions from 2005 to 2014 and instructed employees to leave out key details in messages sent between banks that would have linked the transactions to Sudan, according to a consent order with the New York Department of Financial Services (DFS). By concealing those details, the transactions avoided detection from other banks’ compliance departments, which otherwise could have triggered alerts or asset freezes, DFS said.

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